Jignesh Shah, ambitious man in savage hurry

Jignesh Shah, ambitious man in savage hurry
Mumbai Mirror Bureau

It took nine months of investigations for the police to nab the man in the centre of Rs 5,600 cr NSEL scam.

Jignesh Shah, promoter of scamroiled National Spot Exchange Ltd, the man whose arrest 13,000 investors who lost money in the Rs. 5,600 crore scandal were baying for, was taken into custody by the police on Wednesday, nine months after the scandal broke.

His arrest became imminent the moment the Economic Offence Wing of Mumbai Police gathered evidence about Shah having taken positions, through a private broking firm, in the commodities exchange that he himself owned and ran.

A forensic audit done by auditors hired by the EOW recently revealed how Shah had taken positions in gold and other commodities on MCX which was unethical and illegal.

EOW also said it has gathered evidence is Shah’s role in jacking up volumes in NSEL contracts to raise the value of NSEL’s key promoter-company Financial Technologies Limited (FTIL) (in which Shah and associates owned over 40 per cent stake) in particular and the Multi-Commodity Exchange (MCX) in general.

The EOW had summoned Jignesh Shah several times in the past but he had repeatedly tried to evade the meetings, forcing EOW to seek his custody for interrogation, sources said.

EOW also arrested NSEL group financial controller, Shrikant Javalgekar. With Jignesh’s and Javalgekar’s arrest, the tally of arrests in the NSEL scam has gone up to 11. Additional CP (EOW) Rajvardhan said the two will be produced in court on Thursday.

The EOW registered a criminal case in the NSEL scam in September last year and filed a 9800-page chargesheet in the Maharashtra Protection of Interest of Depositors (MPID) Act court in January this year. During the course of investigation EOW froze assets worth Rs 5100 crore of the defaulting borrowers.

Jignesh the enigma

Jignesh Shah’s father was a trader in iron and steel who moved to Mumbai from Gujarat in the ‘sixties. Even as school student, say people who know him, ambitious little Jignesh had decided on his future, setting his sights on “engineering, business and success”; in fact he met his future wife too while still in primary school.

Shah’s life did proceed according as his childhood plans; he did software engineering from Mumbai and joined Bombay Stock Exchange, where he worked on the exchange’s automation programme, travelling across the globe to study how share markets worked. With the knowledge he acquired, he and his associate Dewang Neralla set up Financial Technologies (FTIL) at a cost of just Rs 5 lakh in 1995, raised by mortgaging Shah’s apartment, and created a software called ODIN which soon garnered majority market share among brokers.

In 2002, the business world was shocked when FTIL applied for a license to set up a commodity exchange, and even more stunned when Multi-Commodity Exchange (MCX) was up and running in under a year’s time. In 2010-2011, it ranked as the fifth or sixth largest commodity exchange globally, sparking a wildfire of commodity futures trading in India, spawning investors in small towns across the country. Over the next few years, he partnered other companies and set up several exchanges overseas, including the Dubai Gold and Commodities Exchange.

In these years he moved from his flat in Kandivali to a bungalow in Juhu. But he was so business-obsessed, a hyperactive man who worked long hours, that his concessions to lifestyle and entertainment were only his Mercedes car, his occasional Gujarati thali at Chetana restaurant in the city and the weekend Bollywood movie. Unwinding meant some quality time with his daughter, who is currently studying medicine in D Y Patil college. “Not for him fancy brands or extravagance of any kind,” said an employee who worked with him for years.

In fact, there is much sympathy for Shah among some quarters for what they see as his very “desi” or “country” ways. “He did not speak fancy English, was not suave, and competitors were suspicious and even contemptuous of him,” said an official. He was admired in his office for his sharpness, for his memory and prodigious capacity for hard work. He was equally feared for his brusque and authoritarian ways and this actually did him in, because as aconsequence he was surrounded by a coterie of yes-men rather than people who spoke their minds. And these yesmen oiled the wheels while he drove up the garden path, said sources.

His sympathisers also felt the established exchanges did their level best to see his equity exchange project (MCX-SX) took off only after a very long battle with regulators. “It is not that we were afraid of competition,” said the former senior official of one of the established exchanges. “We feared Shah’s practices.”

That few disputed. Shah craved lightning success in everything and was a man in such a savage hurry that he pressured his executives immensely, not minding if rules were bent here and there. Finally, his bulldozing success just crashed into a wall.

The scam

Thousands of investors bought commodities on the NSEL platform from borrowers who said they had stocked commodities with NSEL which had given them warehouse receipts in acknowledgment. This was done using paired contracts offering 25 and 35 day settlements that were actually not allowed to a spot exchange. When authorities stopped these contracts, the borrowers defaulted. The exchange could not sell the commodities to pay off investors, because there weren’t any commodities, as the warehouse receipts were forged.